Why the SPAC Boom Fizzled - What Went Wrong

In March 2021, special-purpose acquisition companies raised $36 billion. In July 2022, no new SPACs raised money. 

At their peak, SPACs accounted for 70% of all IPOs, with $95 billion raised. But now, the market has dried up and shares of companies that did SPAC deals have crashed. WSJ explains the decline of the IPO vehicle.

The Death of the SPAC Boom

SPACS, or special purpose acquisition companies, were all the rage at the start of the pandemic. These shell companies raise cash by listing on the stock market, and then seek a merger with a private company. This created a novel way for companies to list on the stock market without having to go through the traditional initial public offering process.

Now, Spacs are floundering. The FT’s Ortenca Aliaj talks with guest host Jess Smith about how the Spac investment boom collided with rising interest rates and regulatory threats, and ultimately went bust.

Check out how SPACS went bust HERE. 

The great un-SPAC-ing

More than 800 SPACs raised capital between May 2020 and December 2021. Underwriting fees were collected; questionable incentives and complexity remained.

SPACs used to be a curious capital-markets sideshow: complex, obscure, hardly novel. A conventional initial public offering underwritten by investment banks was the marker of corporate maturity; merging with a pile of cash and entering the stockmarket by the backdoor was not. This changed when stockmarkets rallied from their covid-induced lows.

Find out more from The Economist HERE.

Spacs: under the microscope

Spacs have pulled in billions of dollars from investors over the past couple of years. But as the FT’s Ortenca Aliaj reports, they’ve also attracted intense scrutiny from regulators. Of particular concern has been the fast-track route to public markets offered by Spacs, as well as some optimistic revenue projections. So, where does that leave the Spacs market?

The IPO is dead! Here comes the SPAC!

Are SPACs a useful innovation, a mania, or both? The SPAC boom in part reflects a rebellion by Silicon Valley types, who have long grumbled about having to go through an IPO.

Silicon Valley has thrived by inventing new ways of doing things, from searching for information to contacting friends. So it may come as no surprise that the Valley is eagerly embracing another sort of disruption: special-purpose acquisition companies (SPACs), as an alternative to the conventional initial public offering (IPO) for startups.

Here is a selection of articles from The Economist on the SPAC.

• The Spectacular boom on Wall Street
• Why SPACs are Wall Street’s latest craze
• What the SPAC craze means for tech investing
• Amsterdam’s financial center gains an edge over continental rivals

“Must Reads” for 18 February

Today’s “Must reads” in banking, fintech, payments, cybersecurity, AI, IoT and risk management include:

• Deep Dive into the MoneyLion and OppFi SPACs
• Banking-as-a-Service (BaaS) Market Next Big Thing
• Community banks need cutting-edge tech to remain competitive
• Automation‌ ‌and‌ ‌IoT‌‌: ‌Transforming‌ ‌How‌ ‌Industries‌ ‌Function‌
• Needed: People To Put The Intelligence In Artificial Intelligence
• 5 ways to a strong password and better personal cybersecurity